spending

UT report finds spending surge among Tennesseans

Tennesseans are spending more and the state’s gross domestic product is growing — even when adjusted for inflation. That’s according to a new report by the Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville.

Here’s the full release from UT:

KNOXVILLE — Tennesseans are going out and spending money again—a trend signaled by a surge in the state’s inflation-adjusted gross domestic product, which grew 5.6 percent in 2021. Real GDP is projected to continue growing in 2022 at 4.2 percent, according to a report released today by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville.

Consumers are spending more confidently due to a third round of federal stimulus checks and the distribution of effective COVID-19 vaccines, which led to the return of in-person services for many consumers.

“The economic recovery has been incredibly strong so far, and the Tennessee economy seems to be on solid footing,” said Larry Kessler, research associate professor in the Boyd Center and project director for the 2022 Economic Report to the Governor of the State of Tennessee. “Real GDP has already recovered to prepandemic levels due to a strong surge in consumer spending. Employment in the state has been a little slower to recover, but we expect job levels to recover by the first half of 2022.”

The report includes a deep dive into the employment recovery in Tennessee and examines how the recovery differs by age, race, gender, marital status, and education, as well as by industrial sectors and geographic area. The state’s labor force participation rate, which sat at 61.8 percent before the pandemic, is projected to reach only 60.9 percent in 2022 and inch up to 61.4 percent in 2023. There is no single explanation for the slower labor market recovery, but many Tennesseans have reflected on their work–life balance since the pandemic began, and some have decided to switch jobs while others may not be as quick to re-enter the labor force for various reasons.

As of October 2021, the labor force among people aged 55 or older has decreased by nearly 55 percent nationwide since the beginning of the pandemic. Only the 35–44 age group has returned to prepandemic levels. There are still about one million fewer people aged 20–34 in the labor force, and another 800,000 fewer people aged 45–54. These changes could be due to workplace safety concerns as new COVID-19 variants emerge, families opting to live on one income instead of two, childcare issues, or an acceleration in retirements.

Despite the slower labor market recovery, employment in Tennessee is projected to reach prepandemic levels by the second quarter of 2022—a quarter ahead of the nation’s projected labor market recovery. The unemployment rate is projected to settle around 4.7 percent for 2021 and fall to 3.9 percent in 2022.

“Following a record-breaking year in terms of both job commitments and capital investment, the state economy continues its strong recovery,” said Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. “Tennesseans are resilient and the state is open for business, as evidenced by the unemployment rate falling closer to prepandemic levels. This is good news for our businesses, our recruitment efforts, and the Tennessee economy as a whole.”

Nonfarm employment is projected to increase by 2.8 percent for 2021 and 3.1 percent in 2022, recovering to prepandemic levels by the second quarter of 2022. State payrolls will get a boost from the manufacturing sector, which is expected to see an employment increase of 3.8 percent for 2021. The hard-hit leisure and hospitality sector is projected see employment expand by 5.9 percent in 2021 and sharply increase by 10.2 percent in 2022 as consumers continue to get more comfortable with in-person services and rising wages attract more workers. Worker burnout is likely driving a labor force contraction in the education and health services sector, with employment falling by 0.6 percent in 2021, but it should see an uptick of 2.2 percent growth in 2022.

“There are still a number of downside risks to economic growth, including supply chain issues, higher prices, and new COVID-19 cases and variants,” Kessler said. “But the state economy has proven to be very resilient, and we project strong economic growth in the near term.”

The report examines the long-term economic outlook for Tennessee as well as the results of the 2020 census. The state grew faster than the US overall, with the population increasing by 8.9 percent versus the national rate of 7.4 percent. Rising death rates and declining birth rates have led to slower growth over the past three decades, but a strong rate of migration into the state has helped keep population growth from slowing even further. Tennessee added 565,000 people between 2010 and 2020, largely in Middle Tennessee’s Davidson County and the counties surrounding it. Rural areas are experiencing slower or even negative growth across the state.

Since 1975, the Boyd Center for Business and Economic Research, housed within UT’s Haslam College of Business, has provided Tennessee’s governor with an annual economic report that includes an in-depth analysis of state and national trends and forecasts.

White House details how much Tennessee would receive from infrastructure bill

President Joe Biden’s administration is detailing how Tennessee would stand to benefit from the $1 trillion infrastructure bill pending in the U.S. Senate.

Here’s the release from the White House:

— Repair and rebuild our roads and bridges with a focus on climate change mitigation, resilience, equity, and safety for all users, including cyclists and pedestrians. In Tennessee there are 881 bridges and over 270 miles of highway in poor condition. Since 2011, commute times have increased by 7.7% in Tennessee and on average, each driver pays $209 per year in costs due to driving on roads in need of repair. Based on formula funding alone, Tennessee would expect to receive $5.8 billion for federal-aid highway apportioned programs and $302 million for bridge replacement and repairs under the Infrastructure Investment and Jobs Act over five years. Tennessee can also compete for the $12.5 billion Bridge Investment Program for economically significant bridges and nearly $16 billion of national funding in the bill dedicated for major projects that will deliver substantial economic benefits to communities.

— Improve healthy, sustainable transportation options for millions of Americans. Tennesseans who take public transportation spend an extra 67.9% of their time commuting and non-White households are 5.6 times more likely to commute via public transportation. 21% of transit vehicles are past useful life. Based on formula funding alone, Tennessee would expect to receive $633 million over five years under the Infrastructure Investment and Jobs Act to improve public transportation options across the state.

— Build a network of EV chargers to facilitate long-distance travel and provide convenient charging options. The U.S. market share of plug-in electric vehicle (EV) sales is only one-third the size of the Chinese EV market. The President believes that must change. The bill invests $7.5 billion to build out the first-ever national network of EV chargers in the United States and is a critical element in the Biden-Harris Administration’s plan to accelerate the adoption of EVs to address the climate crisis and

— Help connect every American to reliable high-speed internet. 5.9% of Tennesseans live in areas where, under the FCC’s benchmark, there is no broadband infrastructure. Even where infrastructure is available, broadband may be too expensive to be within reach. 17% of Tennessee households do not have an internet subscription. Under the Infrastructure Investment and Jobs Act, Tennessee will receive a minimum allocation of $100 million to help provide broadband coverage across the state, including providing access to the at least 402,000 Tennesseans who currently lack it. And, under the Infrastructure Investment and Jobs Act, 2,009,000 or 30% of people in Tennessee will be eligible for the Affordability Connectivity Benefit, which will help low-income families afford internet access.

Over the coming days and weeks, we will expect to receive additional data on the impact of the Infrastructure Investment and Jobs Act in Tennessee.

Lee details amendments to annual spending plan

Gov. Bill Lee speaks to reporters outside the War Memorial Auditorium in Nashville on Jan. 19, 2021. (Erik Schelzig, Tennessee Journal)

Gov. Bill Lee is making his end-of-session amendment to the state’s annual spending plan. Here’s a release from the governor’s office detailing the proposal:

NASHVILLE, Tenn. – Today, Tennessee Governor Bill Lee announced his amendment to the proposed Fiscal Year 2021-2022 budget.  

The amendment includes $580 million in available funds as a result of fiscal prudence. These funds will be invested in strategic long-term projects that focus on a return to pre-pandemic priorities and deliver critical services while not growing government. The budget amendment also includes nearly $100 million for a two-week sales tax holiday on all grocery sales, purchases at restaurants, and all prepared food. 

“This proposal supports Tennesseans by strategically investing in long-term initiatives that will move our state forward,” said Gov. Lee. “I’m especially proud to provide tax cuts to get money back to Tennesseans to encourage them to frequent industries that have been disproportionately and negatively impacted this year.”  

This amendment reflects the Governor’s priorities and includes record investments in broadband, economic development, safety and law enforcement, increasing reserves, and education.  

“Due to Tennessee’s strong financial leadership, Tennessee has been ranked number one in fiscal stability by US World News & Report in both 2019 and 2020,” said Commissioner of Finance and Administration Butch Eley. “Our prudent and cautious approach has established Tennessee as a leader in fiscal conservatism, and we thank the General Assembly for their partnership in these efforts.” 

Notable investments in the FY 21-22 budget amendment include:   

Tax Cuts 

  • $25M for a two-week sales tax holiday for groceries 
  •  $75M for a two-week sales tax holiday for restaurants and all prepared food 
  •  $16M to reduce the professional privilege tax by 25 percent

K-12 Education and Mental Health 

  • $250M trust fund to assist K-12 families who are facing significant mental health issues in the wake of COVID-19 
  • $18.5M to transportation to students for summer learning  
  • $2M to provide an additional 4 high quality, grade aligned books and resources over the summer for the 88,000 rising first graders in Tennessee 

Higher Education 

  • $79M to eliminate current TCAT waitlists statewide, currently at 11,400 students 
  •  $25M to Tennessee Promise to permit increases in the Hope Scholarship  
  • $4M to increase Agriculture Extension Agents at University of Tennessee and Tennessee State University  

Rural & Agriculture  

  • $50K to support the state fair (in addition to the $250,000 recurring in originally proposed budget for total of $300K and $5M non-recurring)  
  • $3M to provide additional funding for rural projects as part of the Rural Economic Opportunity Fund (in addition to $21M in originally proposed budget for total of $24M)   

Safety 

  • $500K to provide gun safety programming for children  
  • $17M to replace radios for state troopers   
  • $18M to improve the statewide disaster communications system  
  • $680K to add 4 new Homeland Security Agents  

Economic Development 

  • $5M to provide grants to restore and preserve historic downtowns across the state  
  • $3M to increase employment in Tennessee through the Small Business Innovation program 

Transportation 

  • $3M recurring and an additional $10M nonrecurring to provide additional direct funding to airports across Tennessee through the Transportation Equity Fund (total $50M investment in air infrastructure) 

To view the full budget amendment, click here.